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April 10, 2006

Humala widens lead, Garcia climbs in Peru vote

by Sam Savage

By Kevin Gray

LIMA, Peru (Reuters) - Nationalist Ollanta Humala, who has
rallied the poor but angered the rich with pledges to
redistribute Peru's wealth, led the presidential election on
Monday and was likely headed to a runoff.

With about 76 percent of the vote counted, Humala, a
43-year-old former army commander and ally of leftist
Venezuelan President Hugo Chavez, had 29.7 percent, election
officials said.

Two other candidates were locked in a close race to
determine who would face Humala in a second round since no
candidate appeared on pace to capture more than 50 percent.

Investors were watching closely to see whether the business
favorite Flores or the leftist Garcia would reach the runoff.

"It's in God's hands," Garcia told reporters.

Pre-election polls showed Humala would likely lose to
Flores in a runoff but would face a tight race with Garcia.

"We still have about 33 percent of the votes to be counted
and a lot of these votes come more from remote areas," said
HSBC Securities strategist Vitali Meschoulam. "These votes will
probably favor either Humala or Garcia," he said.

Election authorities said it could take up to 20 days to
decide second place. The run-off must take place within 30 days
after the final official result is announced. A close race
could also lead to legal challenges of the ballot count.

Lima's stock market lost its initial gains on optimism that
Flores would advance, as investors fretted about a possible
Garcia-Humala runoff. The market closed up 2.3 percent, down
from a 6 percent morning surge, the biggest intraday rise since
1995.

CONCILIATORY TONE

Humala led a failed coup in 2000 and has been accused of
human rights abuses as a soldier, which he denies. He also
pledges to industrialize Peru's production of coca, raw
material for cocaine. If elected, he would be the latest in a
string of Latin American leftists to come to power challenging
U.S. policies like coca eradication.

Peru is the world's No. 2 cocaine producer after Colombia.

Humala, harassed by thousands of people as he voted in a
middle-class area Sunday, urged Peruvians not to be afraid of a
Humala presidency. "People have to realize, we don't want any
kind of traumatic shock for Peru," he said.

"We're not going to expropriate companies or property."

Most popular among the long-neglected poor, Humala pledged
to service Peru's $30 billion debt if elected and keep a small
fiscal deficit despite his generous welfare plans.

"Humala is our voice, the voice of the people," said Elvis
Orosco, a construction worker in Lima. "I'm praying he'll be
president."

The business community fears a second round between Humala
and Garcia, who presided over economic collapse during his
1985-1990 rule. Garcia, 56, saw his backing rise in the final
pre-election polls, as support ebbed for Flores, 46, a lawyer
who has struggled to connect with the poor.

"I'm really holding out for Alan. He's the only one who can
make a difference for Peru," said Octavio Pinedo, who is
unemployed.

Flores, who topped polls only months ago, has played up her
potential role as Peru's first female leader in a country where
women are perceived as more honest.

Whoever is ultimately elected president will face a
fragmented Congress in which no party has a majority, election
results showed, making it harder to push through legislation.